Investment market insights from eScalate Programme Advisor, Andrea Collins
The UK has weathered a number of storms over the last decade+, the financial crisis of 2008/9, uncertainty surrounding our departure from the EU, and then last, but most certainly not least, COVID-19. All of these events have impacted business investment in the UK to varying degrees.
Despite the obvious concerns COVID raised, business investment actually fell less than 2009’s record decline of 15.3%. The lesser fall of 10.2% in 2020 is largely attributed to the banks not freezing lending as they did in the aftermath of the financial crisis; to the contrary, the banks actually increased lending in 2020 with Government backed schemes like the Business Interruption and Bounce Back loans. Furthermore, COVID and Brexit by their very nature have overwhelmingly impacted less ‘capital dependent’ sectors; and shifts in demand and consumer spending have actually resulted in growth for some sectors.
As I mention, in terms of growth and decline amongst sectors, the picture is very mixed. Although COVID’s lockdown restrictions have severely impacted some sectors such as construction, engineering, and mining; the forced shift in consumer behaviours created massive demand in the transport and storage, education, IT, real estate, and health sectors. Where demand lies, investment almost always follows!
So, what lies ahead? Well, much will depend on consumer spending. Increased consumption typically leads to greater confidence, which in turn creates a healthy and more positive environment for investors. On the flip side of course is that we may see companies emerge from the COVID crisis with a greater level of debt, curtailing their capacity to borrow, all of which also influences the investment scene. Despite this, professional services giant Ernst Young, predicts an investment increase of 7.1% this year, increasing to 10.5% in 2022.
So where are investors channelling their funds? Well, a growing sense of ‘personal responsibility’ to invest in more socially and environmentally conscious businesses has pushed sustainability to the forefront of many investors’ minds. Just under 50% of investors interviewed in a recent poll stated that they are actively looking to invest in green or sustainable businesses in 2021 and 2022, whilst a similarly high percentage are considering biotech, MedTech or pharmaceutical investments. It should come as no surprise also that given the massive consumer shift towards online shopping, investment in online retail businesses and enabling technology is also buoyant. Indeed, technology often remains buoyant as other sectors struggle, and so will always attract high levels of investment, not just in the UK but across the globe.
Sadly, start-up investment remains comparatively low at 16%, which is disappointing given the increase in the number of start-ups (13% up on 2020), in part a result of COVID and its impact on employment.
Overwhelmingly, the outlook is positive, particularly if you are in one of the target sectors I mention above. However, even if you operate in a sector outside of these, investment is not beyond reach, but rather it may be a little more challenging right now and may demand that you ‘raise your game’ in order to secure it.
Help at hand! The eScalate programme provides mentoring and ‘hands on’ support to help clients become investment ready, working with you on everything from financial modelling, pitch decks and investor packs through to investor research. If you’d like to learn more, simply drop the team a line at [email protected] and we’ll be delighted to help.